Representative Dennis Richardson: Oregon and Health Care Reform

Health Care Reform: The Oregon Base Plus (OBP) Health Care Plan,
A Sustainable Free Market Health Care Plan
By State Representative Dennis Richardson

Disappointment occurs when hope for reform fails to contemplate the reality of power. Even the best of intentions can be overwhelmed by well-organized and deeply entrenched power. This lesson was learned early by President Reagan’s perceptive, yet unsuccessful, plan to reform Social Security and by President Clinton’s ambitious and unsuccessful plan to reform health care. It is now being learned by President Obama’s embattled plan for a national health care system. Political power comes by uniting coalitions of strong, well-organized agenda-based constituencies. Regardless of whether you support or oppose President Obama’s health care reform plan, the political and financial power of the opposing coalition is formidable, and polls indicate its popularity diminishes daily.

I believe the President’s current attempt at health care reform was doomed from the outset. House Bill 3200 is a 1017 page document that passed out of the House of Representatives along party lines. There were big expectations and little debate. No elected official had taken the time to read or understand it. Now that the dust has settled and HB 3200 has been analyzed, it, like so many past attempts at federal health care reform, is likely to stall. It has provisions that are unacceptable for most American. For instance, it would provide taxpayer subsidies for a family of three earning more than $73,000 a year (so, many hard-working wage earners that make less than $50,000 would be paying to subsidize health insurance for others earning $73,000); in addition, it requires employers to provide health care for part-time workers or be fined (regardless of the ability of the business to afford such coverage or pay the fines). Since no reform is perfect and it is easier to kill a bill than pass it, I have learned that reform is frequently discussed and rarely implemented.

In truth, the political powerbase for most important issues usually fights to maintain the “certainty of the status quo,” and works tirelessly to avoid the “uncertainty of change.” In other words, there will always be winners and losers when change is proposed, and those on the losing side never accept defeat without a fight””the higher the stakes, the harder the fight. Reforming the American health care system is politically very high stakes.

So, what can be done? Every person who is knowledgeable about health care issues agrees the escalating costs of the American health care system are unsustainable. Yet, every attempt at reform — whether Democrat or Republican — is ultimately defeated.

In my opinion, the best hope for meaningful health care reform will come when the parties stop focusing on implementing or opposing health care proposals based on political and philosophical biases. Instead, both parties should refocus on time-tested, universal economic principles that can actually affect the cost, quality and accessibility of health care in America. Since our nation is made up of 50 different states, with 50 different health care systems, it is illogical to think the federal government can implement, in a single (1017 page) bill, a nationalized health care system.

In my opinion, the majority of Americans will not easily concede such a vast concentration of power to the national government. Regardless of propaganda to the contrary, most Americans still believe in the U.S. Constitution, its Bill of Rights, and its Tenth Amendment’s reservation of rights to the states and the people. So, before a health plan can be implemented nationally, it must first prove itself in one state, then be adopted by another, then a third, until it has been sufficiently tried and tested and has gained sufficient momentum to be accepted nationally. Contrary to what current federal and state leaders might think, Americans (and Oregonians) still want a government of, by and for the people. In short, every attempt to place the personal health care decisions of working Americans in the hands of the government will be met with defeat.

Self-sufficient, working Americans do not easily accept being dictated to by national or state officials, no matter how well-intending they might be. As Daniel Webster once said:

“Good intentions will always be pleaded for every assumption of authority. It is hardly too strong to say that the Constitution was made to guard the people against the dangers of good intentions. There are men in all ages who mean to govern well, but they mean to govern. They promise to be good masters, but they mean to be masters.”

My message to the President on his HB 3200 health care bill is this, “The risks, costs and uncertainties of nationalized health care and the resistance against it, are too great.”

Since, in my opinion, federal health care reform is doomed and a progressive state must set the example of a reality-based health care system, Oregon has a unique opportunity to re-chart its course by implementing an economics-based health care plan.

In the recently completed legislative session, Oregon House Bill 2009C was passed generally along party-line votes. I read its 613 pages and provided an analysis in a previous newsletter (Click Here)

Like the President’s plan, Oregon’s HB 2009C contains the “public option,” a government health plan that will compete with the same private plans the government regulates. As stated in the HB 2009C analysis, if the government creates its own plan and has the power to give it an artificially low price, it will effectively and quickly drive the private insurers out of the market. If the private insurers stay in the market, the litany of confining government rules, regulations and mandates eviscerate all competition. The insurance carriers essentially become surrogates to their government masters.

There is a lesson in both the President’s and HB 2009C’s plans. Regardless of promises to the contrary, with both plans the free-market health care system will be strangled. If implemented, America and Oregon will soon have government run health care plans notwithstanding the majority of citizens oppose it.

HB 2009C created a framework for a new Oregon health care system that has yet to be organized. Oregon is at a crossroads. We can either continue down the same path on which President Obama now finds himself””and likely suffer the same expected consequences””or with minor amendments, HB 2009C’s new Health Care Authority can implement an economically sound health care system that is reasonable, affordable, sustainable, and acceptable to the powerful health care industry and a majority of Oregonians.

I am proposing the Oregon Base Plus (OBP) health plan (See Footnote). The “Base” is a Health Savings Account (HSA) funded by the insured individual or an employer providing health benefits with money saved from the lower cost of a high deductible health policy. The insured individual uses an HSA debit card to pay for routine medical, dental and vision expenses, etc., and thereby has personal control over when, where, and what health related services he or she is buying. The “Plus” is for a high deductible health insurance policy that protects the insured from catastrophic medical bills and other medical expenses that exceed the annual deductible and are too large to pay from the HSA.

The OBP seeks to build on the best of our current health care system by,
(a) allowing patients to continue choosing their own doctors,
(b) enabling patients and doctors to continue making important health care decisions, and
(c) providing financial incentives for both patients and providers in ways that will improve the quality and accessibility of health care, curb escalating medical costs through greater patient-consumer involvement in product choices and health care decisions, and promote healthful lifestyle choices.

Instead of paying the high cost of prepaid medical care our the current system, the “Oregon Base Plus” (OBP), health plan enables a person and family to pay with a health care debit card for routine medical, dental, vision and other expenses when the services are received. This debit card taps into a Health Savings Account funded with tax deductible contributions made by the insured person or the employer. Money for the HSA contributions comes from savings in health policy premiums. Rather than pay high insurance premiums to provide health coverage that you may never use, the OBP allows you or your small business employer to pay a much lower premium for a high deductible health insurance policy, and contribute some of the savings to your own HSA. You decide when to draw on those HSA funds, and when you do, the expenses apply toward your insurance policy’s deductible.

Paying for routine health care with the HSA debit card is good for the doctors and other providers, who no longer will have to wait months for payments from the government or insurance companies. It is also good for the insured consumer, who can watch the HSA grow, tax free. HSA funds that are not used for health care eventually can be used for long-term care, job training and even education expenses or other approved personal and family expenses. Thus, wise consumers will have a financial incentive to choose to live a more healthful lifestyle. By staying more healthy and treating chronic diseases earlier, the insured consumer can build up a substantial HSA nest egg under the OBP.

Since the insured will be spending his or her own HSA money for routine health care, there will be a personal interest in considering what is being charged for treatments, examinations, prescriptions, glasses, etc. Presently, with $5 co-pays or the Oregon Health Plan card, a patient gives no thought to whether a prescription costs $4 at Wal-mart or $40 somewhere else, because someone else pays the bill. When it is that person’s own money, he or she might start checking prices instead of just letting the insurance company or the government pick up the tab.

Finally, the OBP is good for the insurance companies. Instead of underwriting health policies based on actuarial risks insurance companies spend enormous sums administering payments for routine health visits. The OBP will allow insurance companies to save money by issuing high deductible policies. Those savings result in lower insurance costs and reduced annual increases.

Here’s a summary of the Oregon Base Plus (OBP) health plan:

–OBP deletes the requirement for “Public Option” government administered health plan created by House Bill 2009C and will keep the government out of private health issues.

–OBP provides for low cost, health insurance policies with deductibles of up to $5,000. The insurance buyer decides how high the deductible is to be for his or her individual policy, and the policy’s premium is determined accordingly. The lower the deductible, the higher the policy premium will be. Each policy is guaranteed issue and cannot be cancelled because of the insured’s subsequent health problems. The policy insures against catastrophic losses due to medical crisis, while the routine visits are paid from the Health Savings Account or otherwise by the insured person.

–OBP plans offer Health Savings Account or Health Opportunity Account options for payment of co-payments and routine health related expenses.

–OBP plans require a standardized Oregon Health Card, which is a health care debit card, to be used for point-of-service payment of routine health services.

–OBP allows the individual or the participating small business employer an income tax deduction for costs of participating health care plans. The income tax deduction applies to both the individual health insurance policy costs and eligible Health Savings Account contributions. Tax deductible HSA contributions can be made annually in an amount not to exceed the deductible selected by the individual insured. The amount in the HSA account continues to grow and rolls over from year to year. The state maintains the HSA funds for OBP participants, and any interest earned goes to the state to offset administration costs, etc. If the number of OBP plans becomes substantial and the amounts of tax free accumulations in HSA’s grows accordingly, the interest earnings retained by the state on the pool of HSA funds could become a significant source of state revenues.

–OBP policy premiums can be paid by either an individual or a small group employer.

–OBP is portable, even when paid by employers. When employment ends, the insured can maintain the policy and the HSA by personally paying the policy’s premiums.

–HSA balances remain the property of the insured and can be rolled over to an IRA when the OBP plan is terminated.

–OBP maximum deductible is $5,000. A maximum coinsurance amount of 20% can be factored in an OBP policy, so long as the total calendar year out-of-pocket, expenses after the deductible, does not exceed $1,000 per individual or $3,000 per family. If the deductible is not met in one calendar year, eligible expenses incurred during the final 30 days of that calendar year carry over to the next calendar year.

–OBP plans are exempt from providing compulsory benefits not required by federal law. Currently, the cost of health insurance policies is substantially increased by more than 30 mandatory benefits required by law. To see a 2008 list of Oregon’s health care mandates, Click Here. The OBP allows health insurance consumers to buy the health benefits for which they want to pay and not get stuck with a litany of benefits that some legislators think would be a nice addition. Nevertheless, there needs to be certain broad categories that should be a part of any minimal health care policy. The OBP would require the following broad categories of coverage:

(a) Hospital benefits;
(b) Surgical benefits;
(c) In-hospital medical benefits;
(d) Ambulatory patient benefits;
(e) Prescription drug benefits;
(f) Mental health benefits; and
(g) Incentives for healthful living, preventative care, chronic disease care.

–OBP plans’ web-based access will provide 24/7 access to participants on their HSA and HOA balances.

–OBP provides that 80% of expenses relating to preexisting medical conditions will be reimburse to participating insurance carriers by the Oregon’s Medical Insurance Pool (OMIP). OMIP payments are equally shared by all of Oregon health insurance companies. This reimbursement provision will continue until the insured individual lives for six consecutive months without care or treatment for the preexisting condition. A “guaranteed issue” policy cannot limit benefits because of preexisting medical conditions. This OBP provision enables the risk of the occasional high-cost applicant to be shared equally by all insurance companies, and thereby eliminates policy underwriting surcharges to protect against possible catastrophic losses from applicants having serious and permanent preexisting medical conditions.

–OBP redefines the Oregon Health Insurance Exchange to provide information and assistance to eligible individuals and employers regarding consumer-based health insurance products described in this Act.

–OBP establishes web-based access to provide information and comparisons regarding available plans, assistance in choosing plans and information and forms relating to end-of-life documents.

Congratulations if you are still with me. Obviously, this newsletter is not for the faint hearted.

Since you are still reading, I can assume you truly are concerned, like I am, about the health care crisis. It is both a cost and coverage-based crisis and it will not be solved with old ideas dressed in new presentations.

What I am proposing is, if nothing else, innovative for Oregon. Although most of its provisions have been tried or suggested in other venues, the Oregon Base Plus is intended to attract broad-based support from consumers and providers due to its expansive use of tax deductible HSA’s, point-of-service debit card payments and inherent incentives for consumer involvement necessary to curtail the unsustainable escalation of health care costs.

Since you have come this far, would you please give me the benefit of your feelings about the Oregon Base Plus health plan proposal? From a lawyer’s standpoint, I have attempted to redraft a bill for the 2011 session that includes all the OBP provisions referred to above. If you have the time and want to be a part of what may become Oregon health care history, feel free to read and critique it for me. (Click Here)

I know some of Oregon’s most knowledgeable and experienced experts in health issues will care enough to read and consider the OBP proposal. To those who really care about Oregon’s health care system, I ask that you set aside for a few minutes any deeply embedded commitment to implementing a “public option,” government run health system, and just consider the possibility of implementing the OBP. I have attached a BRIEF SURVEY to get your opinion of the Oregon Base Plus health plan. Please spend a minute and answer the single question asked about the OBP. (Click here for Survey.) The Survey has space for your comments; I would welcome them.

In closing, my belief is that neither Oregon’s HB 2009C or Congress’ HB 3200 will ever result in a single-payer health system for our state or nation. If I am right, it makes no sense to continue arguing for a system that is not acceptable to a majority of Oregonians and Americans? Why not consider OBP as an alternative that would be approved by a majority of voters? IF, for the sake of argument, a combination HSA and high deductible insurance policy, such as I have proposed here, were to be utilized, what suggestions, criticism, questions or consequences would you see from the OBP proposal? To give me the benefit of your comments, please Click Here for the Survey, or send me a Reply email with your thoughts.

Your input will be greatly appreciated. I do not have all the answers; I merely am proposing a possible solution. Please tell me you opinion of it.

Sincerely,

Dennis Richardson
State Representative
P.S. The Fall revenue forecast has just been released. Tune in next week for a special newsletter on the state of Oregon’s economy.
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Footnote
1. The Oregon Base Plus health care plan is my own; it has not been reviewed, approved or adopted by any caucus, party or any other person or group in Oregon politics. I am solely responsible for the opinions and recommendations expressed in this newsletter.
–Dennis Richardson